Inside Track: City watchdog must be careful to practise what it preaches

 
Mark Kleinman
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IT is not easy to overlook the villainy of the banks and credit card issuers which sold superfluous insurance policies to millions of consumers through the York-based company CPP.

But for sheer duplicity, the sanctimonious words of Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), came close to rivalling the firms it regulates last week.

Summarising the egregious practices that led to the major banks filling a compensation pot potentially worth £1.3bn, Wheatley enthused that “working closely with the FCA and despite their different business needs, a large number of firms have voluntarily come together to create a redress scheme that will provide a fair outcome for customers”.

What he neglected to mention was the fairest outcome of all: redundant financial products not being foisted on customers thanks to a regulator that proactively fulfils its consumer protection mandate.

CPP’s products, after all, were not cloaked in the shadowy disguise of esoteric derivatives. They were simple insurance policies marketed more aggressively than ice cream in the desert.

And yet – so far as we know – not a single member of the regulator’s staff has lost their job, nor had their pay clawed back, nor been publicly excoriated, for allowing this mis-selling scandal to proliferate. If true, why not?

Here’s my recommendation to Wheatley, if he wants to convince the public that the FCA is determined to improve on the record of its predecessor.

It should publish the details of any actions being considered against current employees whose oversight of CPP proved so lamentable.

And the FCA must adopt the same tactic for all future supervisory and enforcement actions to align it with the behaviour it demands from those it regulates.

Its forthcoming report on the implosion of HBOS, as much a calumny of regulatory failure as of banking misbehaviour, would be a good place to start.

M&A DROUGHT
As City bankers return from their summer break to a welter of statistics underlining the poverty of the UK M&A market, their attention will focus on the autumn’s most hotly-contested auction: GlaxoSmithKline’s £1.5bn sale of Lucozade and Ribena.

Japan’s Suntory is widely acknowledged to possess the financial muscle to blow its rivals out of the water, but one private equity consortium has, I understand, identified a secret weapon.

Blackstone and Lion Capital have signed up Graham Neale, the former GSK executive who managed the two brands, to front their offer. Intriguingly, Neale was the man who fought a failed High Court battle over claims about the dental benefits of Ribena Toothkind, the now-defunct spin-off product aimed at children.

But the two buyout groups have form in the soft drinks sector and I suspect they will prove hard to beat.

LSE NEEDS WOMEN
Of the various excuses proffered by big listed companies for flouting guidelines on boardroom diversity, it is usually horny-handed miners or male-dominated oil companies that bemoan the absence of women in their industries’ executive ranks.

How, then, to explain, the fact that – of all companies – the London Stock Exchange Group finds itself with not a single woman among its dozen board members?

True, it was the recent departure of Gay Huey Evans, a non-executive director, which left the LSE depleted, but it had plenty of time to plan for her exit.

It would be embarrassing, and strike a real blow to the diversity agenda, if one of the UK’s flagship companies felt unable to meet Lord Davies’s suggested target of 25 per cent of female board members by 2015.

Time for chairman Chris Gibson-Smith to embark on a recruitment drive.

Mark Kleinman is the City editor of Sky News

Follow on Twitter: @MarkKleinmanSky